TaxTMI 
TaxTMI 
2009 (3) TMI 579
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....co-promoter to revive the company. The petition is resisted by several persons and principally by the Official Liquidator, who has moved an application for confirmation of sale of the only remaining items of property namely industrial shed in Plot No. 142, Sector 24, Faridabad. M/s. Saket Steels Limited has obtained a decree in respect of the very same property for specific performance in a civil suit bearing No. 66 of 1990 and they have sought for execution of the decree before this Court. Haryana State Electricity Board is another principal contender against the proposals for revival on the ground that money claims arising out of same proceedings still remain unsatisfied and the petition for revival cannot be allowed. M/s. Freshness Coatings (P.) Ltd., which has been the successful bidder and whose sale is sought for confirmation by the Official Liquidator would oppose the petition on the ground that the sale of the property which is being made for favour of Rs. 4.10 crores is now sought to be undone at the instance of another person who is 7th petitioner and it is only a ploy to sell the property to another person and there is no scope for revival of the company itself especiall....
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....36 for a total sale consideration of Rs. 4.10 crores and this Court confirmed the sale on 17-9-2004 in favour of M/s. Excel Buildcon Private Limited. The State Bank of India-respondent No. 2 was a secured creditor in respect of other assets of the company bearing Plot No. 142, Sector 24 and was interested in expediting the process to pay to itself the debts owed by DSECL from it. The State Bank of India had also a second charge over the assets of the factory premises in Plot No. 136, Sector 24 and after a meeting which the Official Liquidator held, the property in Plot No. 142, Sector 24, Faridabad was taken possession of and obtained permission of the Court, vide its order dated 9-2-2006, for sale of the property in Plot No. 142 in association with the secured creditors by giving wide publicity. III. Simultaneous efforts by the Ex-Directors to settle claims by OTS 4. Simultaneously with the efforts of the Official Liquidator to dispose of the property in Plot No. 142, the Ex-Directors and majority shareholders of the company had initiated for a One Time Settlement with the State Bank of India and Haryana Financial Corporation, as well as settling the claims of the workers. T....
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....made the Managing Director. Over 85 per cent of the equity shareholdings were to be held with Mr. Sanjay Gulati and 15 per cent of the equity shareholding to be retained by Mr. K.K. Dabriwala on behalf of the existing shareholders of the DSECL. V. The financial reckoning and the basis of objections for revival : HFC's woes 6. The objections to the revival of the company have gone through several quarters. The Official Liquidator himself has filed a report giving out the details of the amounts available in the account of the company in liquidation as Rs. 75,37,054 including their FDRs on 31-3-2008 and setting out the provision for expenses to the tune of Rs. 10,21,740. The amount in deposit included Rs. 25,00,000 deposited by M/s. Freshness Coatings (P.) Ltd. for the purchase of property of the company situate at Plot No. 142, Sector 24 and in respect to which confirmation was awaited through the application, C.A. No. 296 of 2006. The valuation fee and professional fee of Chartered Accountant were also to be paid for which the application had been moved in C.A. Nos. 172-173 of 2008. The objection of Haryana Financial Corporation is to the effect that the demands that had been ....
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....f demand charges assessed at Rs. 10.4 lakhs and a net penalty of Rs. 6.4 lakhs but after deduction of the claim by the company for a sum of Rs. 6.4 lakhs, a net amount of Rs. 4 lakhs alone awarded in favour of the Electricity Board. It was not satisfied with the Award passed by the Arbitrator for the fact that the Arbitrator had purportedly acted beyond his jurisdiction and waived off energy charges from November, 1979 to 2-3-1987, which was not within the ambit of the reference before the Arbitrator. According to the Electricity Board, the amount recoverable from the company was to the tune of Rs. 42,43,621 and the reduction of the amount to Rs. 4 lakhs was on account of non-application of cogent mind and reasonable basis. This Award had been challenged before the Senior Sub-Judge, Faridabad by petition dated 31-3-1987 and the Award of the Arbitrator had also been upheld. The order passed by the Additional District Judge which accepted the claim of the Electricity Board to the tune of Rs. 10.4 lakhs was however not accepted by the Official Liquidator in view of the fact that leave of the High Court had not been obtained for pursuing the remedy before the Additional District Judge.....
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.... on 6-7-2006 before the Company Court. VI. DESCL's response to objections 10. The parties have submitted authorities for various issues touching upon the dispute between the parties. The learned counsel appearing for the applicants seeking for revival contends that since all the claims of the creditors have been fully satisfied except the claims of the Electricity Board and HFC, there cannot be any obstruction at the instance of any person for approving the proposal made by the applicants. The learned counsel concedes that he will make any amount that may be determined by the Court as payable by the company to them. There is no need for following any formulations as detailed under sections 391, 393 and 394 in view of the fact that the special procedure is only to apprise the claims of the shareholders and creditors and since all the shareholders have jointly proposed the scheme for revival and since all the major creditors including workers in the company have already been satisfied, the only creditors who remained were the Electricity Board and the HFC and their objections being also heard before the Court, there was no scope for following any procedure laid down under secti....
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....l or nullify or obtain any claim against the company but merely to protect unnecessary litigation and from multiplicity of proceedings and to further protect the assets for equal distributions amongst the creditors and shareholders. This object was achieved by compelling a creditor or person having a claim against a company to approach the Court for obtaining necessary orders. 12. Raghunath Rai Bareja v. Punjab National Bank [2007] 135 Comp. Cas. 163 (SC) was a case where the Hon'ble Court dealt with a situation when a decree had become time-barred and the Court was found not to have jurisdiction to transfer a claim by a Bank to DRT for enforcement under the RDB Act even if equity existed in favour of a Bank to realise its dues and the bank had itself to blame in filing its execution petition beyond the period of limitation. Chandra Kishore Jha v. Mahavir Prasad JT1999 (7) SC 256 refers to a general proposition that when a statute provides a thing to be done in particular manner then it has to be done in that manner and in no other manner. The learned counsel refers to this proposition to drive home his point that the plaintiff who was pursuing his remedy for specific performanc....
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...., hence, the High Court was correct in refusing the grant of leave. It said that an order of attachment under the State Financial Corporations Act was passed for achieving the limited purpose and it has to be always understood as susceptible to other orders as well as provisions of other statute. VII. The objections omnibus in a nutshell 13. The opposition for revival comes from a previous successful auction purchaser who obviously expects to take over the assets and obtain a profit through the transaction. Yet another person is a person, who has obtained a decree for specific enforcement of an agreement through a Court process, although not decided on merits after a full-fledged adjudication in trial but obtained on default of appearance by the respondent when the company was in liquidation. The Electricity Board which has obtained an Award under the arbitral proceedings but being still not satisfied what it got was pressing forward its disputed claims before a Court in supersession of the Award and the proceedings before the Civil Court having not completed, they have been transported to the Company Court for finalization of the disputes. The Official Liquidator has really ....
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....ss was being run has already been disposed of. As a matter of record Plot No. 136 with the factory was disposed of in pursuance of the order of this Court passed in C.A. No. 321 of 2003 for a consideration of Rs. 4.10 crores and confirmed by this Court by its order dated 17-9-2004 passed in C.A. No. 110 of 2004 in C.P. No. 72 of 1995 in favour of M/s. Excel Buildcon Private Limited, Delhi. VIII. Revival, always the cherished goal Two views are definitely possible: if a company has lost its core assets of the plant and machineries and the residual property is merely a vacant piece of land, could it really be said to be bona fide in its claim that it seeks to revive the company? There could just as well be another perception that a company that has lost, during its bad times, the core assets has not after all lost everything. It is still left with valuable piece of land on which the whole new edifice should be brought about. Industries do not come up in thin air. The most vital thing for starting industry is the availability of the property and the infrastructure that goes with it. It is an admitted case that Plot No. 142 is in the industrial hub of Faridabad and has all the ne....
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.... modified scheme contemplated a revival of only one of the activities of the company namely of the spinning unit and for facilitating the same it had contemplated a disposal of the portion of the assets. There were really several proposals coming from several quarters including the secured creditors. Starting a viable industry instead of selling any portion of the land was considered feasible. A re-convening of the meeting of the members of the company to consider the modifications and ensuring their approval seemed to be a necessary imperative for finalising the proposals for revival. It was in this context that the Hon'ble Supreme Court said that a scheme which was merely a proposal for disposal of the assets of the company by private negotiations ought not to be accepted. However, in this case the opposition for revival of the scheme is sought for at the instance of persons who want the only assets of the company to be sold and the sale already held to be confirmed. There are no unsecured creditors whose claims remain unsatisfied. The claims coming from a third party having a decree for specific performance or by the Electricity Board for determination of the amount due to it ha....
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....g Court which passed the decree when the winding up proceedings are before the Company Court and feels constrained to move this Court seeking for permission to execute the decree through the Company Court under section 446 of the Companies Act. The objections from the counsel appearing on behalf of the Ex-Directors of the company are made under two counts :- (i)at the time when the decree was passed there had been already proceedings before BIFR and there was a statutory stay of proceedings under section 22 of the SICA Act. The decree passed was, therefore, void ab initio. The stay of proceedings contemplated under section 22 operated eo instante where the question of knowledge of the proceedings is irrelevant. (ii)The effect of section 446 was such as to make any other Court incompetent to deal with any matter relating to the affairs of the company otherwise than by resort to the Companies Act. The bar against institution of suit or where a suit is pending at the date of the winding up, the continuation of such proceedings against the company except when the leave of the Court was impermissible and the proceedings ought to have been stayed forthwith. The only legitimacy that....
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....n the other hand, the decree-holder has approached this Court under section 446 for leave and for execution of the decree. (ii ) Extent of bar under the Companies Act 18. The other objection relating to the executability of the decree is urged by the counsel, Mr. Anand Chhibbar on the ground that section 446 itself operates to create a stay in respect of any proceeding pending before it and I have no difficulty in accepting the contention of the decree-holder that the decree is not void ab initio but will be voidable at the instance of the company for proceeding to grant a decree in spite of the fact that the property had become vested with the Official Liquidator as such by the order of winding up before the decree had been passed. The suit has been instituted in the year 1990 and I do not think it will be fair to direct the re-trial of the proceeding. Of the voidable nature of a decree, it does not require a person at whose instance it could be avoided should proceed to take independent action for setting it aside. The avoidance is possible even in defence if the company states that the decree obtained against is voidable at its instance. In response, the decree-holder cann....
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....s sought is within time as on the date of the filing of the leave, the application will be entertained. The time spent for obtaining the leave under section 446 will have to be excluded by applying section 15(2) of the Limitation Act. In this case more than supporting his contention, it points out to an important thing that the application seeking for sanction for execution will have to be itself filed within the time. The suit has been decreed on 19-4-1996 and the petition for sanction has been filed on 3-7-2006. The limitation for execution of the decree is 12 years and admittedly the petition for sanction has not been filed within the period. The question is, could such a permission be granted in view of the fact that at the time when the decree was passed, the company had already been directed to be wound up. 19. In my view, the avoidance of a decree, which is possible at the instance of the company, becomes complete when a defence is taken that the decree was not executable by virtue of the operation of stay under section 446(1). The Court exercising jurisdiction when it relieves a party from the obligations of void or voidable contract, has the power under section 33 of th....
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....that was before the date when the winding up order was made, a liability was fixed on the company for a net amount of Rs. 4 lakhs and directed it to be payable within 30 days from the making of the Award. It has some default clauses as well. HSEB was dissatisfied with the award on the premise that the Arbitrator had gone beyond his jurisdiction in entering upon a reference, which was specifically excluded from him on issue relating to energy charges. The energy charges themselves, according to the Electricity Board, ran to several lakhs of Rupees and that had never been disputed but wrongly found in the Arbitrator's Award as not claimable. The Award had been originally challenged in the Court of the Senior Sub Judge, Faridabad by a petition dated 31-3-1987 who also dismissed it. The order of dismissal was challenged in the appeal before the Additional District Judge where the claim of the HSEB was allowed to the extent of Rs. 10.4 lakhs. However, this order was passed during the time when the company had already been directed to be wound up and, therefore, HSEB had approached the Official Liquidator for re-adjudication of the claim. The Official Liquidator himself did not consider ....
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....as referred to above in the manner determined by the Official Liquidator in confirmation of the amount found by the Arbitrator at the first instance. XII. Answers as regards objection from HFC and in respect of all other sundry claims 23. The objection coming from HFC, who is the third respondent, is with regard to the disbursement of Rs. 4.05 crores to the State Bank of India as including the claim by the State Bank of India against yet another company, even apart the amount due by the company-in-liquidation to the State Bank of India. The contention by the Ex-Directors of the company that the HFC had itself admitted to OTS at Rs. 2.50 lakhs was specifically denied. HFC had made a demand for Rs. 85,57,600 with further interest with effect from 1-10-2007. The HFC was itself the first secured creditor in respect of the Plot No. 136 and the State Bank of India was only a second secured creditor. 24. The report of the Official Liquidator records the fact that the Court had directed the disbursement of Rs. 4.05 crores to the State Bank of India as full and final payment of the claims against the company and Rs. 10,82,255 as the amount payable in satisfaction of the award of th....
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.... fees of Chartered Accountant this office has already moved an application bearing C.A. Nos. 172-73 of 2008 seeking permission of this Hon'ble Court to make the payment fee from the sale proceed is also pending and fixed for 25-4-2008. 29. That in view of the above, out of the total funds available with this office, viz., Rs. 75,37,054, the OL has to make payment of liquidation expenses of Rs. 10,21,740 and also Rs. 25,00,000 lying as Earnest Money. To this amount, I direct that a further sum of 5 per cent on the value of the property as bid by the M/s. Freshness Coatings Limited to be paid as solatium for loss of property for no fault of the purchaser. This additional payment is made by applying the principles contained under Order 21 Rule 89 of the Civil Procedure Code, which enunciates a principle of equity for a person who is deprived of the property that he legitimately expected to buy and took time and resources to participate in the sale and declared the successful bidder. XIII. Alleged non-compliance of statutory requirements 30. Apart from the objections of OL in the shape of his report, the objections in unison from all the respondents to the petition for revival....